Asked by alexis marie logan on May 07, 2024
Verified
Decaprio Incorporated produces and sells a single product. The company has provided its contribution format income statement for June. 
If the company sells 9,200 units, its net operating income should be closest to:
A) $27,077
B) $49,900
C) $36,700
D) $25,900
Contribution Format
The contribution format is a financial statement layout that separates fixed and variable costs, allowing for easier calculation of contribution margin and breakeven analysis.
Net Operating Income
The profit realized from a business's operations after subtracting operating expenses from revenue.
Units
A basic measure or quantity of a product, service, or resource, often used in manufacturing, inventory, and accounting.
- Comprehend and determine the effect of variations in sales volume on net operating income.
Verified Answer
NE
Nicholas EltzrothMay 11, 2024
Final Answer :
C
Explanation :
Using the contribution margin per unit, we can calculate the contribution margin for 9,200 units:
Contribution margin per unit = Sales price per unit - Variable cost per unit
= $50 - $28
= $22
Total contribution margin for 9,200 units = 9,200 units x $22 per unit = $202,400
We can then subtract the total fixed costs to find the net operating income:
Net operating income = Total contribution margin - Total fixed costs
= $202,400 - $165,700
= $36,700
Therefore, the closest answer choice is C) $36,700.
Contribution margin per unit = Sales price per unit - Variable cost per unit
= $50 - $28
= $22
Total contribution margin for 9,200 units = 9,200 units x $22 per unit = $202,400
We can then subtract the total fixed costs to find the net operating income:
Net operating income = Total contribution margin - Total fixed costs
= $202,400 - $165,700
= $36,700
Therefore, the closest answer choice is C) $36,700.
Learning Objectives
- Comprehend and determine the effect of variations in sales volume on net operating income.